Second Belt and Road Forum: Prospects and Challenges

On April 25-27, 2019, the Second Belt and Road Forum for International Cooperation will be held in Beijing. For want of a specialised, institutionalised mechanism for coordinating cooperation along the Belt and Road path, this forum, as envisioned by the Chinese leadership, is intended to serve as a multilateral platform to discuss the current state of affairs and clarify the “road map” of this initiative.

Over the years since the announcement of the Chinese initiative in 2013, the scale of its international support has increased significantly. According to China, at the moment Beijing has signed 173 documents on cooperation in the framework of the Belt and Road initiative (BRI) with 125 countries and 29 international organisations.

A major breakthrough in the context of expanding international recognition of the initiative was the willingness of some developed Western countries to cooperate with Beijing in the implementation of the Belt and Road project. Previously they'd preferred to keep a distance from it. At the same time, it is curious that if the intention by Japan in 2017-2018 to participate in the initiative as a co-investor went almost unnoticed, Italy’s recent signing of a memorandum of understanding within the framework of the BRI initiative provoked bitter discontent from the United States and several Western European countries. Italy was the first of the G7 countries to put its participation in the Chinese initiative in writing.

At the same time, despite growing international support for the Chinese initiative, Beijing faces great difficulties in the process of its implementation. In the past few months, information has appeared about rapidly growing indebtedness to China among a number of developing countries (Sri Lanka, the Maldives, Pakistan, Kyrgyzstan, Djibouti, Zambia, etc.), and about suspension of some flagship BRI projects in some countries (Malaysia, Pakistan, Nepal, Myanmar, Sierra Leone, Tanzania). Although in most cases the blame for the current situation lies primarily with the concerned governments, which miscalculated the potential benefits of the projects and hurried to turn to Chinese lending without a serious analysis of the lending conditions and all the potential risks, Beijing nevertheless must answer its critics’ charges concerning the Belt and Path Initiative. 

To date, only two countries have spoken out openly against the Chinese initiative – India and the United States. The Western European countries and Japan are very cautious. On the one hand, they've shown their intentions to expand trade, financial and investment cooperation with China, while on the other hand, they've take measures to hedge the risks associated with the development of the Chinese initiative. So, Japan is actively promoting the concept of “quality infrastructure”, and the EU aims to develop a unified coordinated policy regarding the Chinese initiative and Chinese investments. Inflated fears among the Western European countries have prompted deeper cooperation between China and the Central and Eastern European countries in the 16 + 1 format (with Greece joining this dialogue in April 2019, the format has changed its title to 17 + 1), and Chinese investments in strategic sectors within the economies of Europe. 

Criticism of China's BRI from the Western powers concentrate mainly on the following provisions:

- The decisive role of the state, and not the private sector in the Chinese Belt and Road initiative.

- The discrepancy between the conditions for the provision of lending by China to the recipient countries and standards developed by the OECD Development Assistance Commission, which could lead to a financial crises in the recipient countries. As BRI critics point out, in some cases China, knowing of the inability of individual countries to repay borrowed funds, allocates large loans to them to later obtain various privileges, for example, gaining control over the infrastructure created with China’s financing. 

- China provides economically "binding" loans. At the same time, this binding may not only presume that contracts are executed by Chinese contractors using Chinese building materials, equipment and Chinese labour, but also requires for recipient countries to introduce, for example, the Chinese Baidu navigation system or Chinese telecommunications products (made by Huawei and ZTE).

- The absence of the requirements for borrowing countries traditionally imposed by the West (democratic reforms, introduction of good governance, compliance with environmental standards, labour standards, etc.) undermines the efforts of Western countries to promote the democratic processes and the spread of "best practices".

- Lack of transparency in the implementation of the initiative. For example, Beijing does not disclose information about what countries and in which form participate in BRI, memorandums of understanding are not published; there is not even a list of countries that have signed such memorandums.

The Chinese initiative is often spoken of in the West as an initiative created by China and for China. Behind China’s Belt and Road initiative and related large-scale investments, the alarmists see Beijing’s hidden intentions: to establish strong economic dependence among developing countries on China (now China is the largest trading partner for more than 100 countries throughout the world) for subsequent use as a lever of pressure, as well as the Chinese strategy of reformatting the international economic system, the global transport and logistics system, creating a Chinese-centric world.

Russia officially supports the initiative of its strategic partner, while it did not sign the memorandum of understanding, focusing on another promising initiative for the whole Eurasian space, the Greater Eurasian Partnership, proposed by President Vladimir Putin in December 2015. By giving priority to a deepening cooperation within the EAEU and developing the idea of ​​the Greater Eurasian Partnership, Moscow at the same time is making efforts to expand cooperation with Beijing on a wide range of trade, economic and financial issues.

Views expressed are of individual Members and Contributors, rather than the Club's, unless explicitly stated otherwise.